The amount that, pursuant to the provisions of Article 37 (Necessary Expenses), is included in the necessary expenses that are used to calculate a Resident's real property income, business income, timber income, or miscellaneous income, as the depreciation allowance for a Depreciable Asset held by the Resident on December 31 of the relevant year is the amount calculated pursuant to Cabinet Order based on the depreciation method that the Resident has selected for the asset from among the method under which the depreciation allowance is the same every year, the method under which the depreciation allowance decreases every year at a fixed rate, and the other depreciation methods prescribed by Cabinet Order by date of acquisition and asset category (or based on the depreciation method prescribed by Cabinet Order, if the Resident does not select a depreciation method).

Cabinet Order establishes special provisions on the selectable depreciation methods referred to in the preceding paragraph and provides for the way of selecting a depreciation method, the acquisition costs of Depreciable Assets that are to be used as the basis of the calculation of the depreciation allowance, special provisions under which the amount corresponding to the part of an amount expended on a Depreciable Asset that extends its usable life or similar is treated as the acquisition cost of a Depreciable Asset, and other particulars that need to be prescribed concerning the depreciation of Depreciable Assets.